ECB hikes interest rate | Stocks remain volatile
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1.30pm: ECB raises interest rates
The European Central Bank has increased interest rates by a half point, sticking to the plans set out last month, despite concern about the health of the banks and stock market volatility.
ECB President Christine Lagarde and her colleagues raised the main refinancing rate to 3.5% from the current 3%.
Credit Suisse‘s problems may lead to a takeover, potentially by UBS, according to investment bank JP Morgan.
In a note to investors, analysts said the real issue is not the bank’s capital position but “ongoing market confidence issues” with its international business strategy.
A loan deal for Credit Suisse helped inject confidence back into the market, though the FTSE 100 gave up a 100 points early rise and was trading flat after the ECB decision.
HSBC and Barclays were amongst the top gainers on the index.
About £75bn in combined market value was wiped from blue chips yesterday after the index fell 293 points – its deepest fall on a points basis since the early days of the COVID crisis.
Zurich-based bank Credit Suisse’s 30% shares slide prompted it to seek support from the Swiss national bank. Full story here.
The banking sector in Europe and the United States were rocked by a huge sell-off following the collapse of Silicon Valley Bank and Signature Bank in the US.
Wall Street stocks plunged last night as concerns about the health of the global banking industry continued to weigh on the market with a warning that Silicon Valley Bank’s failure could spread further than previously anticipated.
The Dow Jones Industrial Average fell as much as 726 points, or 2.3%, before recovering to a 280-point dip on the day; the S&P 500 and tech-heavy Nasdaq similarly slid as much as 2% apiece before rebounding to 0.7% decline and a 0.1% gain, respectively.
Gary Ng, senior economist at Natixis Corporate and Investment Bank, told the Reuters agency that investors might be worried about Silicon Valley Bank and Credit Suisse for different reasons, but both suffered from the side effect of high-interest rates.
8am: John Lewis bonus axed
Staff at the John Lewis Partnership will not receive a bonus for only the second time since 1953 after the retail group fell to a loss.
The group, which runs the department store chain and Waitrose supermarkets, recorded a £78m loss before exceptional items for the year to 28 January.
It represented a slump from a £181m profit in the previous year, with John Lewis blaming “inflationary pressures”.
7am: National World
National World, publisher of newspaper titles including The Scotsman, said it is making progress towards a “digital only model” and is pursuing acquisition opportunities.
Despite total revenue being down 9% year on year, due to economic conditions, the company said it had met its EBITDA target for January and February. Trading is expected to remain challenging for the first half.
Estate agency Savills said it expected a tough first half as it reported a fall in annual profits.
The company said pre-tax profit for the year to 31 December fell 16% to £154m, slightly better than expected. Revenue rose 7% to £2.3bn.
“In the year ahead, challenging macro conditions are expected to continue with inflation and interest rates remaining in focus for some time,” Savills said.
“As a result, the speed at which individual investment markets adjust to the cost of debt is uncertain, although certain markets, such as the UK, are recalibrating faster than in the past, and will be helped by the lack of development supply and an overall trend to sustainability.”
Meal delivery company Deliveroo said it would make up to £50 million in core earnings this year after achieving a better-than-expected positive margin in the second half of 2022 as its focus on profitability started to pay off.
The company reported an adjusted core loss of £70.5 million (€80.2 million) for 2022, in line with analyst expectations.